Petaluma urged to investigate Theatre District construction deals

The recent disclosure that a Petaluma builder hired to work on the $100 million Theatre District redevelopment project also is on the board of the development firm for the project sparked calls Monday for an audit and legal review of the relationship and the nearly $10 million in cost overruns.

At the center of concern is North Bay Construction owner John Barella, who also owns the Roblar Road rock quarry site in southern Sonoma County. In court filings related to a lawsuit filed by opponents of the quarry, Barella wrote recently that he also is the single largest investor in developer Basin Street Properties, which was formerly based in Petaluma.

The disclosure that Barella has been financially linked with Basin Street since 1996 apparently was unknown to Petaluma city officials when they contracted with Basin Street to complete the Theatre District on Petaluma Boulevard South. Basin Street subsequently hired North Bay Construction for infrastructure work on the joint project with the city.

The project, which includes a parking garage, movie theater, commercial and office space and apartments, was built between 2003 and 2007 as an effort to revitalize the city's aging downtown.

The city's share of the project started at $7.9 million but grew $17.1 million, capped by $4.8 million to cover late cost overruns in September 2005. The City Council, though displeased with the overages, approved the money on a 6-1 vote.

Now, some are questioning whether Barella's ties with Basin Street constituted a conflict of interest or would have changed Petaluma's approach to the project.

Former councilman David Keller on Monday asked the council to authorize an independent financial audit and legal review of the relationships and prepare a report evaluating the ethics of those who advised the city.

The council took no action on the request.

Mayor David Glass, who also was mayor in 2005 and voted to approve funding for the cost overruns, said he didn't know of Barella's involvement with Basin Street until recently.

Former council member Pam Torliatt was the sole vote against the funding in 2005, saying the city's deal with Basin Street called for the developer to cover most cost overruns and shouldn't have been overridden without more scrutiny.

"I would have liked to have known," Glass said Monday during an informal City Council discussion of the matter. "Didn't know. The bottom line is, it's a wonderful project."

The district is now considered a jewel of downtown Petaluma, bringing in additional sales tax and property tax revenue to city coffers.

Councilman Mike Healy, who also said he didn't know of Barella's business dealings when he was on the council in 2005, wondered whether it makes any difference.

He said the cost overruns came mostly from engineering drawings that were incomplete, underground soil contamination that wasn't discovered until deep into construction and reimbursement from an assessment district that never materialized.

City Attorney Eric Danly said there was a "fair amount of city control over the contract" with Basin Street. The contract required Basin Street to award the construction contract to the lowest bidder, which was North Bay Construction. At the time, it was not disclosed that the two companies were financially connected.

The costly change orders and markups between subcontractors raise some concern, he said, which may have been scrutinized more closely had the city known of Barella's financial relationships.

"But the fact of that relationship in and of itself in my opinion .<TH>.<TH>. I don't think that necessarily means that that was a problematic transaction," he said.

Barella on Monday wouldn't speak in detail about the controversy, which was sparked by a lengthy article in the Bohemian weekly newspaper that called the dealings "shady" and suggested Petaluma's current budget problems are a result of the Theatre District deal.

"All I can say (to them) is &amp;&lsquo;prove it,'" Barella said. "Let them do all the poking around they want to."